NTL's hopes of creating a heavyweight media firm were hit after its £817 million offer for Virgin Mobile was rejected by the telecoms group.
However, Virgin's majority shareholder Sir Richard Branson said his gut-feeling was that an agreement would be reached.
Virgin Mobile said the potential offer "materially undervalued" the business. As a result it was unanimously rejected by the board of Virgin Mobile.
Cable provider NTL said on Monday it wanted to create a communications giant offering a range of services to about nine million customers under the Virgin brand.
Virgin said it had consulted with its major independent shareholders before making the decision. Sir Richard said the group's independent directors wanted NTL to raise its takeover offer and that he was confident a deal would still be struck.
He did not think the two sides would fall out over a relatively small sum of money, saying the actual difference was only about £25 million.
They were quite close to an agreement.
"Since the combined group is going to be something like £5 billion, my gut feeling is NTL will come up and meet whatever figure it is they are after if they feel the forecasts are correct, or some sort of compromise will be reached," he said. Everyone saw the logic of the deal. But he wanted to make sure shareholders were protected so he would leave it up to the independent board members to negotiate.
"I think everybody's grownup, adult people, and want to see a deal get done," he said.
Virgin's independent board said it only considered the 323p a share potential offer price announced by NTL in reaching its decision.
It said it did not consider or solicit any other price.
Sir Richard said: "The nonexecutive directors have decided they want to try to extract better value from NTL and obviously I wish them well with that."
A tie-up would create the UK's first "quadruple play" provider, offering mobile phones, fixed-line phones, internet broadband and television.
It would provide greater competition to the industry dominance of telecoms firm BT and broadcaster BSkyB.
NTL is already in the process of merging with Telewest - a company-transforming move that will give it a total of five million residential subscribers across its operations.
The interest in Virgin Mobile is the latest development in a busy period for the telecoms sector, which recently saw Spain's Telefonica agree to buy mobile group O2. Analysts had tipped Virgin Mobile as the next takeover target.